This Insurance companies have been requesting the government to make changes in the first schedule of the Finance Act 2009. which was amended and which suggests a levy of tax on unrealised gains. This is one of the many points, the insurance industry wants Budget 2010 to address. Ajay Bimbhet, Managing Director, Royal Sundaram Alliance Insurance Company Limited, lists his as well as the industry's expectations from the Budget.

Taxability of unrealised gains in respect of general insurance companies The general insurance industry has been struggling to break even in an intensely competitive market. Such an inequitable tax would be a further burden on our severely strained bottom-lines and would most certainly impact our rate of growth. In order to encourage general insurance players to be active participants in the capital markets, there is a requirement for specific exemption from income tax on profit on sale of investments. From April 1st, 2010, profits on sale of investments are stated to be taxed as business income attracting highest marginal rate. Alternatively, general insurance companies to be placed on par with other industries on applicability of capital gains tax provision.

Rate of Taxation There is a strong case for a level playing field for all the insurance companies with equitable rules and regulations and a failure to address this issue would only be a deterrent to our growth.

TDS on foreign reinsurance premium It is imperative to effectuate a suitable amendment to rule 6 of the First Schedule to exempt foreign reinsurers (where there is no business connection or permanent establishment involved) from applicability of taxation in India.

Service tax exemptions Small transactions involving premium up to Rs. 2500/- should be exempt from service tax which will unquestionably benefit the under-privileged sections of our society. Furthermore, insurance premium for covering small and medium enterprise risks should be exempt from Service Tax and for other insurance products, we would like a reduction in the service tax by at least 3 to 4%. Such an exemption would facilitate administrative convenience in policy processing and in the context of the low penetration of insurance in our country, insurance would become more affordable accessible for the common man.

Service tax exemptions on health insurance The service tax on health insurance should be abolished altogether as this is further deterrent for prospective health insurance customers at a time when the industry is already grappling with abysmally low levels of pan India penetration. Abolishing the service tax will have a two pronged effect of making health insurance accessible for the layman and will also enable pan India penetration of health insurance. If the abolition is not possible, then the tax should at least be reduced from the present 10.3% to 5%.

Waive Service Tax on micro insurance products The growth of the rural insurance industry necessitates a waiver of the service tax, which currently stands at 10.3% including education cess. This tax is detrimental to the growth of the rural insurance industry and disregards the plight of the rural populace who lack quality healthcare and are vulnerable to numerous perils, including illness, accidental death and disability, loss of property due to theft or fire, agricultural losses, and disasters of both the natural and man-made varieties. In order to address the glaring inequities in rural health and also bridge the rural- urban divide in healthcare, these are issues which need urgent redressal.

Income tax benefit for personal lines of non - life policies Additional IT exemption for householder's policies and concessional IT rates would undoubtedly give a fillip to personal insurance and reduce the burden on the government in the event of catastrophes (CAT events). The glaring low penetration levels of insurance necessitate a revaluation of the current regulations in order to encourage the layman, in particular the urban middle class to buy insurance.

Establish catastrophe reserves The huge thrust given of late to intensify the pace economic activity in our country has also been witness to a great concentration of risks in the coastal areas which necessitate a protection for these exposures. Akin to the developed world, we too need to encourage the insurance industry to establish catastrophe reserves.

Royal Sundaram customers are requested to remit the premium by way of cheque, demand draft(drawn in favour of Royal Sundaram General Insurance Co.Limited) or any other approved banking mode. Customers are requested to avoid payment of premium by cash as far as possible. For any clarifications Please call us on 1860 425 0000

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